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Use the information below to answer the following questions. Currency per U.S. $ Australia dollar 1.2387 6-months forward 1.2346 Japan Yen 100.4300 6-months forward 99.9500 U.K. Pound .6795 6-months forward .6778 Suppose interest rate parity holds, and the current risk-free rate in the United States is 4 percent per six months. Use the approximate interest rate parity equation to answer the following questions. Requirement 1: What must the six-month risk-free rate be in Australia? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Risk-free rate % Requirement 2: What must the six-month risk-free rate be in Japan? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Risk-free rate % Requirement 3: What must the six-month risk-free rate be in Great Britain? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Jordan Enterprises is considering a capital expenditure that requires an initial investment of ?$48,000 and returns? after-tax cash inflows of ?$8,144 per year for 10 years. The firm has a maximum acceptable payback period of 8 years.
Now suppose we add a riskless asset to the investment possibilities. What effects will this have on the construction of portfolios
Templeton extended care facilities is considering the acquisition of a chain of cemeteries for $400 million since the primary asset of this business is real estate Templeton’s management has determined that they will be able to borrow the majority of..
Erik, Inc. and James, Inc. have debt-total asset ratios of 60 percent and 40 percent and returns on total assets of 20 percent and 30 percent, respectively. Erik has a greater return on equity?explain your reason.
Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $110,000 and sell its old low-pressure glueball, which is fully depreciated, for $20,000. What is the equivalent annual savings from the purchase..
CP Venture Partners is looking at the possible investment of $1 million in an early-stage company (Startco). Given the stage of the investment, CP requires a 40% annual rate of return. The company earned $750,000 in EBITDA last year, and this amount ..
If you deposit $3,000 in a bank account that pays 9% interest annually, how much will be in your account after 5 years? What is the present value of a security that will pay $22,000 in 20 years if securities of equal risk pay 4% annually?
Consider a mutual fund with 152 million dollars in assets at the start of the year, and 23 millon shares outstanding. If the gross annual return last year was 15.6 percent, and the fund charges a total expense ratio of 1.1 percent of end-of-year valu..
At year-end 2013, Wallace Landscaping’s total assets were $1.0 million and its accounts payable were $350,000. Sales, which in 2013 were $2.5 million, are expected to increase by 25% in 2014. Total assets and accounts payable are proportional to sale..
Kathy is 60 years of age and self-employed. During the year (2015) she reported $100,000 of revenues and $40,000 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount..
Cyberco Corporation has 5 million shares of stock outstanding. Cyberco's after-tax profits are $15 million and the corporation's stock is selling at a price-earnings multiple of 10, for a stock price of $30 per share. Use the price earnings multiple ..
The management of Casper Company is planning to purchase a new milling machine that will cost $160,000 installed. The old milling machine has been fully depreciated but can be sold for $15,000. The new machine will be depreciated on a straight line b..
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